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I was speaking to a group of employers in London recently about the Government’s recently introduced proposal to ban confidentiality clauses (or NDAs to use the American terminology) in cases involving discrimination allegations. Judging by their worried looks and their comments, this is a development that is causing employers a lot of concern.

As an employment lawyer for more than 30 years, I’ve seen the full spectrum of discrimination and harassment allegations against employers. From very serious to relatively minor, and of course several vexatious claims along the way. As it stands, employers can settle all such claims out-of-court by making a payment to the complainant and having confidentiality terms within a settlement agreement. Of course this process is open to abuse – most prominently in the Harvey Weinstein cases in America.

Although cases such as that are extremely serious, they are not the norm. Many processes that occur between employees and employers – disciplinary, grievance, redundancy – may include a discrimination strand. The employer may not be admitting the discrimination but, as above, it is open to the parties to negotiate a settlement that resolves all outstanding issues. The employee is required to take independent legal advice on the resolution.

To be clear, under the Government’s new proposals, a settlement agreement in these circumstances would still be binding as far as employment tribunal claims are concerned. The payment of the compensation to the employee, the signed settlement agreement and the independent legal advice would still prevent that employee from initiating legal action. However, any confidentiality terms would unenforceable and the employee could publicise the discrimination allegation and the compensation received.

Employers are naturally concerned about reputational damage. Even though the employer may technically not have admitted discrimination, the payment of compensation makes them look guilty. So is this an example of the law of unintended consequences? Will employers become more reluctant to settle discrimination claims if they cannot prevent public disclosure? Instead, employers may prefer to undertake extensive investigation and grievance processes so that the allegations are fully considered and outcomes given. Thus employers would be equipped to respond to any post-employment allegations of discrimination, for example from the press, that the allegations were fully investigated and not upheld. That clearly could lead to more contentious processes and extensive use of resources. And how would reputational damage play out in this scenario?

We will monitor with interest Parliamentary debate on these proposals in the autumn of 2025 and keep you updated.

If you would like further information on any of the topics detailed please email advice@sherrardslaw.com or call the office on 01273 834120 to talk to a member of the team.

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